$QCOM (QUALCOMM Incorporated)

Morgan Stanley analyst James Faucette asked for more clarity on $QCOM's contract dispute with South Korean smartphone maker LG Electronics. President Derek Aberle said that the dispute is part of the business licensing agreement, and $QCOM will try to resolve this issue, most probably, this year.

$QCOM's executive Derek Aberle has decided to leave the company, amid the fierce legal battle with $AAPL, after serving 17 years at the company. As a part of the transition, Alex Rogers,executive vice president and QTL president, will report directly to CEO Steve Mollenkopf.

$QCOM announced new Spectra ISPs that is designed with advanced depth-sensing feature as well as improved biometric authentication. The second-generation Spectra ISP is designed for both smartphone as well as head-mounted devices.

During 3Q17, $QCOM entered into a collaboration with Packet, a metal cloud provider, to deliver consumable cloud platform based on the its Centriq 2400 processor to be accessed by the software development community.

In regard with its battle against $AAPL, $QCOM has filed patent infringement complaints against the iPhone maker with both the International Trade Commission and in Federal Court in the US. The ITC investigation is expected to commence in August and the case will be tried next year.

$QCOM'S pending $38Bil takeover of NXP Semiconductors is seen as a key strategy to expand its Internet of Things. The smartphone chipmaker expects the combined company to have an annual revenue of more than $30Bil. The transaction, that may face obstacles in the European Union, is expected to close by end of calendar 2017.

For 4Q17 $QCOM expects its revenue to be in the range of $5.4-6.2Bil. The company expects its diluted EPS to be about $0.55-0.65 and non-GAAP EPS to be in the range of $0.75-0.85. This guidance does not include QTL revenues related to the sale of $AAPL products by Apple’s contract manufacturers

$QCOM's 3Q17 results were negatively impacted due to the actions taken by $AAPL's contract manufacturers, who failed to fully report and not pay royalties due on the sales of $AAPL products. Due to this the company did not provide certain metrics of its QTL business, which include total device sales and related estimated ranges of device shipment.

$QCOM, that is facing several litigation issues, posted 40% drop in 3Q17 earnings, mainly due to the bitter legal battle with $AAPL, who did not report and pay royalties. Revenues fell 11% YoY to $5.4Bil. Net income were $0.9Bil, or $0.58 per share, down 40% from $1.4Bil, or $0.97 per share in 3Q16. Excluding items, $QCOM earned $0.83 per share.

$BBRY, which reported non-GAAP profitability for the third consecutive quarter in 1Q18, said that it secured key design wins in high growth segments of automotive technology. $BBRY, once a market leader in smartphone companies, added that its ecosystem is growing with $QCOM and $NVDA adopting BlackBerry technology for their automotive platforms.

$AAPL said $QCOM is trying to charge $AAPL a percentage of the
total iPhone value. The work done by $QCOM on standard-essential patents is only
a small part of the iPhone and it has nothing to do with the display, touch id
or any other innovation done by $AAPL. $AAPL believes this dispute is a matter
of principle.

$QCOM said the process to acquire NXP is going well. The company
has filed for approval in China and plans to file in Europe soon with other
jurisdictions following the European filing. $QCOM has not put out a final estimate
for the financing cost although $QCOM believes the acquisition debt could be
$10-12Bil.

$QCOM's dispute
with $AAPL is on whether $QCOM owes $AAPL about $1Bil under its Cooperation
Agreement. $QCOM said $AAPL withheld payments to their contract manufacturers
who in turn withheld payments to $QCOM on royalties. This is reflected in 2Q17.
The high end of 3Q17 guidance would be reflective of $QCOM getting its due payments
in full.

$QCOM expects 3Q17 revenue of $5.3-6.1Bil, EPS of $0.67-0.92 and non-GAAP EPS of $0.90-1.15. $QCOM predicts MSM chip shipments of 180-200MM, and reported device sales of about $59-67Bil. $QCOM said forecast is wider than typical practice due to uncertainty in royalties from $AAPL contract manufacturers.

$QCOM said $AAPL's contract manufacturers reported, but underpaid, royalties in 2Q17. But, $QCOM's revenues were not negatively impacted as contract makers acknowledged amounts are due and the underpayment was equal to the amounts that $QCOM has not paid $AAPL under cooperation agreement that are now in dispute.

$QCOM reported a dip in 2Q17 earnings due to Qualcomm Strategic Initiatives segment exclusion and certain share-based compensation. Net income fell to $749MM or $0.50 per share from $1.16Bil or $0.78 per share last year. Revenue dropped to $5.02Bil from $5.55Bil. Non-GAAP EPS increased to $1.34 from $1.04.

With further progress in China, $QCOM said that it is now in a position of collecting about 80% of the Chinese OEM global device sales. In Feb. 2016, the company reported that it will try to get to about 75% collection with the key deals and now it stands at 80%. Over time, $QCOM hopes to take that number higher.

With regards to KFTC's fine, $QCOM said that it will appeal in the Seoul High Court. This appeal process can take quite some time in the Seoul High Court, if necessary, subsequent quarters. With regards to the FTC case, $QCOM said that it will take some time obviously.